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Bail-out bill: Still a bitter pill?

By Jonathan Beale
BBC News, Washington

A global economic crisis had been in danger of becoming a political crisis in Washington.

Asian traders react positively after the Senate passed the bill

But the US Senate has ridden to the rescue of the $700bn (Ł380bn) bail-out - and revived its chances of success. Now it moves to the other side of the Capitol - the House of Representatives - the same House of Representatives that had rejected an earlier version of the bill.

Is this new version of the bailout bill likely to be any more palatable to legislators in the House?

For many House Republicans the old bill was too bitter a pill to swallow because it was seen as a bailout for Wall Street.

The voters didn't much like the sound of that - and let their representatives know.

So the Senate has changed the language. The new bill is being sold as broader economic relief -help targeted not so much at irresponsible bankers, but ordinary Americans and a rescue more for Main Street rather than just Wall Street.

Apart from language, there are other important changes.

The new version of the bill raises the insurance consumers have on their savings. The amount the government will guarantee in any individuals bank account will go up from $100,000 to $250,000 for the next year.

Tax breaks

It was something designed to appeal to Democrats as well a Republicans. The decision has been widely applauded - though it may end up costing the banks more. They will have to pay higher insurance premiums to shore up the insurance fund.

Key to getting recalcitrant House Republicans on side was the addition of tax breaks aimed at small businesses and middle-income earners. But tax cuts can work both ways.

CHANGES TO BILL

Raises government's guarantee on savings from $100,000 to $250,000

Tax breaks to help small businesses and promote renewable energy

Expansion of child tax credit and help for victims of recent hurricanes

So called "Blue Dog Democrats" in the House - those who are more fiscally conservative - want to know how these tax breaks will be funded.

They have long argued that tax breaks will make no sense if it increases the federal deficit. House Majority leader Steny Hoyer has said he is angry about the tax cuts, but has stopped short of saying that he will not support the bill.

And in a move clearly designed to appease some Democrats the bill does include incentives for renewable forms of energy. Investment in wind and solar energy will be rewarded.

Blame game

In fact the new bill bears the hallmarks of political compromise with both Democrats and Republicans trying to put aside their party differences in the interests of the country. It worked for the Senate - and might just persuade the House.

Of course it is much harder for the House to say "No" a second time. Guess who will get blamed if the financial crisis gets worse?

And it is worth remembering that in a few weeks' time every seat in the House is up for election. Last night senators were congratulating themselves on reaching a historic deal - and it will not take them long to blame their colleagues in the House if they reject all the hard work.

Public opinion has so far been firmly against the bailout

There is also political pressure coming from the White House. These days that does not count for much. President Bush's earlier intervention only managed to persuade a few Republican legislators in his own state of Texas to support the original bill.

But the latest word from his advisers is that after hitting the phones over the last few days he has managed to convert another four Republicans. That is clearly still not enough.

But the atmospherics are more positive than a week ago. Republican legislators say that the calls coming into their offices from the public are now less vehemently opposed to the rescue package. Last week it was around 90% against, now its more like fifty-fifty.

Of course that is all anecdotal. But Republicans are also saying nicer things about the new bail-out in public too.

Take John Shadegg - a Republican from Arizona. On Monday he was among the 133 in his party who voted against the old bill. He says the new one is "materially better."

But we will not know for sure until Friday night. A senior House Democrat told me last night that he was now "hopeful" that the new bill would get through, but he was not prepared to give any guarantees

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